The economy is in the tank! We’ve already had one stimulus package this year to try and get
the economy moving. There is talk about the need for a second stimulus package to loosen the economic logjam. I have
a suggestion for a stimulus package that can help both senior citizens and the economy.

Under current law, senior citizens who reach the age of 70-1/2 must take a Minimum Required
Distribution (MRD) each year from their 401 and IRA accounts. In doing so, their distributions are taxed by the
federal government at ordinary income tax rates. The current economic downturn has created a major problem for
these senior citizens. The amount of money that must be withdrawn is computed on the value of their retirement
account as of December 31 of the previous year. This year that means the amount of the withdrawal is based upon the
value of their account as of December 31, 2007. Today, much of the value of their account has
disappeared.

Let’s consider the following hypothetical example. As of December 31, 2007, the value of
the retirement account was $500,000. Further, let’s assume that by December 31, 2008, the value of the account had
fallen to $250,000, a 50% drop. We will assume that the retiree is 76 years of age and that his income places him
in the 25% tax bracket. From IRS tables, our 76 year old retiree has a projected life expectancy of 22 years and
therefore must withdraw 1/22 of his retirement savings this year, or $22,727 and with a 25% tax bracket he must
pay $5,682 in federal income taxes. In 2008, our retiree’s savings will have decreased from $500,000 to
$244,318

In a “normal” year, our retiree might have seen his $500,000 earn him some 5% in dividends
and interest, or $25,000, and, after paying $5,682 in taxes on his MRD, his savings at the end of 2008 would have
been $519,318. Our Senior Citizen has thus been hit twice, once for $250,000 by the economic downturn and a second
time for $5,682 by being taxed on the basis of savings that he now no longer has.

What I am proposing is that the federal government declare a temporary moratorium on
taxing the MRD. In the example given above, our retiree would have an extra $5,682 to pump into the economy which
would constitute a stimulus package for senior citizens. How about it Mr. President and members of
Congress?